Gas prices rise: Is Obama to blame?

Gas prices are 14 percent higher than a year ago, though US demand has risen only 0.7 percent. So what – or who – is driving up prices? The Heritage Foundation points a finger at Obama's environmental policies.

This is the time of year when gasoline prices normally go down.

Instead, prices at the pump have been rising, hitting $3.12 per gallon nationally on Friday, according to AAA, the motorists club. That's 39 cents a gallon – 14 percent – higher than a year ago.

Ironically, American demand for gasoline has risen only 0.7 percent in the past year.

So, what – or who – is responsible for the price increase? President Obama? China? The oil companies?

In the months ahead, the blame game is likely to pick up. Last week, the conservative Heritage Foundation said the Obama Administration and its allies are making things worse with their restrictions on oil drilling. Public Citizen, a Washington-based watchdog group, says the bad guys are not in Washington but on Wall Street, where commodity speculators are driving up the price of oil. And, on Friday, in a press conference, the American Petroleum Institute (API) laid some of the blame on rising demand from China and India.

Even though gas prices have been rising since Labor Day, it is not the chief worry of Americans – yet.

“It’s a stealth issue,” says Dennis Jacobe, chief economist at the Gallup Organization in Washington. “It will come up and bite people at some point, but it’s not surfacing in a lot of our polling.”

In a recent Gallup Poll, he says, the price of gasoline is the third concern of Americans following jobs and the budget deficit. “It’s just not able to rise through all the other problems to catch people's attention,” he says.

If prices keep rising, that might change. The last time gasoline prices rose through the winter was in January 2008. By July, the price at the pump had peaked at $4.11 a gallon. Online, people proposed boycotts of oil companies and told sagas of high prices causing consumer angst.

Of course, in summer 2008, President Bush was in the White House and there were no restrictions on drilling for new oil – but the price rose anyway. At the time, some blamed energy speculators for driving up crude oil prices, which peaked at about $140 a barrel.

The same thing is happening again, says Tyson Slocum, an energy analyst at Public Citizen.

"We have not adjusted the rules since a speculative bubble occurred in 2008,” he says. “A speculative-driven bubble ... has formed again in the commodity markets.”

The American Petroleum Institute thinks the rising price – which closed Friday just under $90 per barrel – is driven by higher demand, particularly in such countries as China and India. Worldwide, demand for crude oil is up 2.2 million barrels per day over this time last year, including an increase of 350,000 barrels per day in the US. Total world demand hit 87.7 million barrels per day in 2010. The US Department of Energy's Energy Information Administration estimates that demand will grow another 1.5 million barrels per day in 2011.

"The record demand tells me this is mostly about market fundamentals,” says John Felmy, chief economist at the API in Washington, but he thinks Washington could ease some of the pressures. “If we could produce more oil here, it would help,” he says. “It would also provide jobs and revenue for the government.”

The Heritage Foundation proposed three specific policy changes to help with gasoline prices.

First, it recommends drilling for more oil, even though it admits “drill, baby, drill” is not a panacea. In a policy paper, David Kreutzer, an energy expert at the Foundation, wrote, “More petroleum on the world market helps to hold prices in check.”

Second, Mr. Kreutzer thinks the Obama administration’s tilt towards cleaner fuel standards is driving opposition to a petroleum pipeline from Canada’s tar sands that would provide the US more than 1 million barrels of petroleum each day – more than it imports from either Saudi Arabia or Venezuela, two of America's largest suppliers.

Lastly, Kreutzer would put a leash on the EPA, whose regulations, he claims, drive up the costs of producing a gallon of gasoline.

Many of these arguments resonate with Republicans, now the majority in the House.

“This is obviously something we are keeping a close eye on,” says Brendan Buck, spokesman for John Boehner, House Majority Leader. “We don’t agree with some of the barriers President Obama has up to increasing domestic production.”

On Thursday, Robert Gibbs, the President’s press secretary, said energy independence and the security of the planet “are and will continue to be issues that we’re going to have to deal with.”

Mr. Gibbs added, “And, again, more and more and more of our oil comes from – or our energy comes from places that are not here. That puts us at a disadvantage.”

Gibbs noted that President Obama had taken some steps to change fuel economy standards to lessen usage of foreign oil. But, he concluded, "I think there’s no doubt that we have a lot more to do.”